SCOTTS VALLEY, Calif., Jan. 21 /CNW/ -- Seagate Technology (Nasdaq: STX)
today reported preliminary results for the quarter ended January 2, 2009 of 37
million disk drive unit shipments, revenue of $2.3 billion, a net loss of $496
million, and net loss per share of $1.02 for the quarter ended January 2,
2009. Net loss and net loss per share for the quarter include $18 million of
purchased intangibles amortization and other charges associated with
acquisitions, restructuring and related accelerated depreciation charges of
$94 million, and a charge of $271 million that reflects an unfavorable
adjustment to the valuation allowance related to the company's deferred tax
assets. The aggregate impact of these items is a $383 million loss or
approximately $0.79 per share loss. Of the $94 million restructuring and
related charges, $16 million was for accelerated depreciation charges recorded
in cost of revenue ($2 million) and product development expense ($14 million)
with the majority of the balance related to the recently disclosed global
headcount reduction.
For the six months ended January 2, 2009 the company reported preliminary
results of disk drive unit shipments of 85 million, revenue of $5.3 billion, a
net loss of $436 million, and net loss per share of $0.90. Net loss and net
loss per share include $37 million of purchased intangibles amortization and
other charges associated with acquisitions, charges related to restructuring
activities of $145 million, and a charge of $271 million that reflects an
unfavorable adjustment to the valuation allowance related to the company's
deferred tax assets. The aggregate impact of these items is a $453 million
reduction in earnings, or a decrease of approximately $0.93 per share. Of the
$145 million in restructuring related charges, $44 million was for accelerated
depreciation charges booked in cost of revenue ($30 million) and product
development expense ($14 million) with the majority of the balance related to
the previously disclosed global headcount reduction.
As disclosed on December 24, 2008 via a Form 8-K filing, the company has
concluded that it is required to record an impairment charge to reduce the
carrying value of its goodwill and possibly other long-lived assets. The
carrying values of goodwill and other long-lived assets subject to this
assessment are approximately $2.3 billion and $2.6 billion, respectively. The
accompanying results for the quarter ended January 2, 2009 are preliminary, as
the various valuation studies and other analyses required to determine the
impairment charge(s) have not yet been completed. The company expects this
analysis will be completed on a timely basis, and the impact of any impairment
charge(s) and any related income tax effects will be reflected in the
financial statements to be included in our Form 10-Q that will be filed for
the quarter-ended January 2, 2009.
"We remain focused on executing against our business plan and on aligning
the company's cost structure with the current economic reality," said Steve
Luczo, chairman, president and chief executive officer. "We continue to
believe that Seagate has a solid future and view the long-term prospects for
storage to be positive; however, there are significant near-term challenges
facing Seagate that we believe could potentially continue through the end of
the calendar year and into 2010. The Board and management team are focused on
structuring our business accordingly, building liquidity and strengthening the
balance sheet to ensure that we are competitive throughout a period of
extended macroeconomic decline. Our technology assets, investments and
capabilities remain intact and we are making smarter and faster decisions to
improve execution. We continue to believe that the fundamental core strengths
that Seagate possesses, when fully leveraged, will result in product
leadership across all markets in our industry."
Business Outlook
For the March quarter, in light of the company's view of the current
market environment and the uncertainty in global economic conditions, the
company is planning for the overall demand for disk drives to be approximately
110 million units. In addition, the company is assuming no significant changes
in its market share, and therefore expects revenue to be approximately $1.6 -
$2.0 billion. The company will continue to evaluate the demand environment to
determine what further actions are necessary to properly align its cost
structure with the company's current view of the macroeconomic environment.
Additionally, the company expects to incur additional restructuring charges
directly related to the recently announced global workforce reduction in the
March quarter.
Current uncertainty in global economic conditions makes it particularly
difficult to predict product demand and other related matters and makes it
more likely that Seagate's actual results could differ materially from current
expectations.
Cash and Liquidity
The company continues to remain focused on building liquidity and
strengthening its balance sheet by taking decisive actions to reduce capital
spending, lower operating expenses and to align production with demand to
limit inventory and therefore believes it will generate or obtain sources of
liquidity to support the business.
-- Cash and cash equivalents and short-term investments ended the quarter
at $1.3 billion, an increase of $156 million compared to the previous quarter.
-- During the quarter the company borrowed $350 million under its
existing $500 million senior unsecured revolving credit facility. The
remaining undrawn committed amount, after giving effect to the $350 million
borrowing and approximately $50 million used for outstanding letters of
credit, is approximately $100 million.
-- Management has recommended, and the board has approved, reducing the
quarterly dividend to $0.03 per share. This action is expected to reduce our
cash outflows by approximately $175 million over the next 12 months.
-- Compared to the prior quarter, days sales outstanding (DSO) was flat
at 42 days, days payable outstanding (DPO) decreased by 6 days to 64 and days
of inventory outstanding (DIO) increased by 4 days to 37. In aggregate, our
cash conversion cycle increased by 10 days to 15.
-- Total debt was $2.4 billion at the end of the quarter inclusive of the
credit facility borrowing. Long-term debt maturities over the next 18 months
consist primarily of $300 million in October of 2009 (floating rate senior
notes) and $135 million in April of 2010 (6.8% convertible senior notes).
-- Investment in capital equipment for the first six months of the
company's fiscal year 2009 was approximately $494 million. The company
currently expects fiscal 2009 investment in capital equipment to be
approximately $650 million. Based on the company's current macroeconomic view
it expects fiscal year 2010 capital investment to be below $500 million.
Additional information relating to the financial results for the second
fiscal quarter of 2009 can be found online at seagate.com.
Dividend
The board has approved a quarterly dividend of $0.03 per share to be paid
on or before February 20, 2009 to all common shareholders of record as of
February 6, 2009.
Conference Call
Seagate will hold a conference call to review the fiscal second quarter
results at 2:00 p.m. Pacific Time today. The conference call can be accessed
online at seagate.com or by phone as follows:
USA: (877) 223-6202
International: (706) 679-3742
Conference ID: 78910747
Replay
A replay will be available beginning today at 6:00 p.m. Pacific Time
through January 28 at 8:59 p.m. Pacific Time. The replay can be accessed from
seagate.com or by phone as follows:
USA: (800) 642-1687
International: (706) 645-9291
Conference ID: 78910747
About Seagate
Seagate is the worldwide leader in the design, manufacture and marketing
of hard disk drives and storage solutions, providing products for a wide-range
of applications, including Enterprise, Desktop, Mobile Computing, Consumer
Electronics and Branded Solutions. Seagate's business model leverages
technology leadership and world-class manufacturing to deliver
industry-leading innovation and quality to its global customers, with the goal
of being the time-to-market leader in all markets in which it participates.
The company is committed to providing award-winning products, customer support
and reliability to meet the world's growing demand for information storage.
Seagate can be found around the globe and at http://www.seagate.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These forward-looking
statements include, but are not limited to, statements related to the
company's future operating and financial performance, including expected
revenue, net loss and losses per share and product competition, customer
demand for our products, the impact of our cost reduction efforts, the
estimated charges we expect to incur with respect to the impairment of our
goodwill and long-lived assets and general market conditions. These
forward-looking statements are based on information available to Seagate as of
the date of this press release. Current expectations, forecasts and
assumptions involve a number of risks, uncertainties, and other factors that
could cause actual results to differ materially from those anticipated by
these forward-looking statements. Such risks, uncertainties, and other factors
may be beyond the company's control. In particular, uncertainty in global
economic conditions pose a risk to the overall economy as consumers and
businesses may defer purchases in response to tighter credit and negative
financial news. Such risks and uncertainties also include the impact of the
variable demand and the aggressive pricing environment for disk drives,
particularly in view of current business and economic conditions; dependence
on Seagate's ability to successfully qualify, manufacture and sell its disk
drive products in increasing volumes on a cost-effective basis and with
acceptable quality, particularly the new disk drive products with lower cost
structures; the impact of competitive product announcements and possible
excess industry supply with respect to particular disk drive products; our
ability to achieve projected cost savings in connection with our announced
restructuring plans; and market conditions and alternative cash imperatives
that could continue to delay our ability to repurchase additional common
shares pursuant to Seagate's previously announced share repurchase program.
Information concerning risk, uncertainties and other factors that could cause
results to differ materially from those projected in the forward-looking
statements is contained in the company's Annual Report on Form 10-K as filed
with the U.S. Securities and Exchange Commission on August 13, 2008, and in
the company's Quarterly Report on Form 10-Q as filed with the U.S. Securities
and Exchange Commission on October 30, 2008, which statements are incorporated
into this press release by reference. These forward-looking statements should
not be relied upon as representing the company's views as of any subsequent
date and Seagate undertakes no obligation to update forward-looking statements
to reflect events or circumstances after the date they were made.
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
(preliminary)
January 2, June 27,
2009 (a) 2008 (b)
ASSETS
Cash and cash equivalents $1,161 $990
Short-term investments 148 151
Accounts receivable, net 1,040 1,410
Inventories 796 945
Deferred income taxes 157 274
Other current assets 486 502
Total Current Assets 3,788 4,272
Property, equipment and leasehold
improvements, net 2,513 2,464
Goodwill 2,318 2,352
Other intangible assets, net 78 111
Deferred income taxes 441 616
Other assets, net 217 305
Total Assets $9,355 $10,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $350 $-
Accounts payable 1,370 1,652
Accrued employee compensation 156 440
Accrued warranty 212 226
Accrued expenses 586 599
Accrued income taxes 13 10
Current portion of long-term debt 320 360
Total Current Liabilities 3,007 3,287
Long-term accrued warranty 229 219
Long-term accrued income taxes 166 210
Other non-current liabilities 134 148
Long-term debt, less current portion 1,684 1,670
Total Liabilities 5,220 5,534
Shareholders' Equity 4,135 4,586
Total Liabilities and Shareholders' Equity $9,355 $10,120
(a) The information in this column is preliminary and does not yet reflect
charge(s) for impairment of goodwill and possibly other long-lived
assets, and any related tax effects, that are expected to be recorded
in the quarter ended January 2, 2009, and timely included in our Form
10-Q.
(b) The information in this column was derived from the Company's audited
consolidated balance sheet as of June 27, 2008.
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
For the Three Months Ended For the Six Months Ended
(preliminary) (preliminary)
January 2, December 28, January 2, December 28,
2009 (a) 2007 2009 (a) 2007
Revenue $2,270 $3,420 $5,302 $6,705
Cost of revenue 1,948 2,531 4,455 5,008
Product development 235 262 495 504
Marketing and
administrative 142 167 289 319
Amortization of
intangibles 14 13 28 27
Restructuring and other,
net 78 27 101 32
Total operating
expenses 2,417 3,000 5,368 5,890
Income (loss) from
operations (147) 420 (66) 815
Interest income 5 19 12 35
Interest expense (30) (34) (60) (66)
Other, net (14) 18 (27) 14
Other income (expense),
net (39) 3 (75) (17)
Income (loss) before
income taxes (186) 423 (141) 798
Provision for
(benefit from)
income taxes 310 20 295 40
Net income (loss) $(496) $403 $(436) $758
Net income (loss)
per share:
Basic $(1.02) $0.77 $(0.90) $1.43
Diluted (1.02) 0.73 (0.90) 1.37
Number of shares used
in per share
calculations:
Basic 487 526 486 529
Diluted 487 556 486 558
(a) The information in this column is preliminary and does not yet reflect
charge(s) for impairment of goodwill and possibly other long-lived
assets, and any related tax effects, that are expected to be recorded
in the quarter ended January 2, 2009, and timely included in our Form
10-Q.
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Six Months Ended
(preliminary)
January 2, December 28,
2009 (a) 2007
OPERATING ACTIVITIES
Net income (loss) $(436) $758
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 481 420
Stock-based compensation 53 58
Deferred income taxes 300 12
Other non-cash operating activities, net (13) (9)
Changes in operating assets and liabilities:
Accounts receivable 368 (249)
Inventories 149 (36)
Accounts payable (282) 475
Accrued expenses, employee
compensation and warranty (389) 74
Other assets and liabilities 162 (25)
Net cash provided by (used in)
operating activities 393 1,478
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements (494) (362)
Proceeds from sale of fixed assets 3 24
Purchases of short-term investments (116) (383)
Maturities and sales of short-term investments 120 222
Proceeds from sale of investment in
equity securities 11 -
Acquisitions, net of cash acquired - (78)
Other investing activities, net 1 17
Net cash provided by (used in)
investing activities (475) (560)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 350 -
Repayment of long-term debt (15) -
Proceeds from exercise of employee
stock options and employee stock purchase plan 36 132
Dividends to shareholders (118) (107)
Repurchases of common shares - (500)
Other financing activities, net - 2
Net cash provided by (used in)
financing activities 253 (473)
Increase (decrease) in cash and cash equivalents 171 445
Cash and cash equivalents at the beginning
of the period 990 988
Cash and cash equivalents at the end
of the period $1,161 $1,433
(a) The information in this column is preliminary and does not yet reflect
charge(s) for impairment of goodwill and possibly other long-lived
assets, and any related tax effects, that are expected to be recorded
in the quarter ended January 2, 2009, and timely included in our Form
10-Q.